Housing Alliance sues banks for blight in Black communities
19th February 2018 · 0 Comments
By Ryan Whirty
Contributing Writer
The Greater New Orleans Fair Housing Action Center, along with the National Fair Housing Alliance and 18 other civil rights organizations from across the country, filed a housing discrimination lawsuit in federal district court on Feb. 1 against Deutsche Bank, alleging the financial giant failed to maintain its foreclosed, bank-owned properties in middle- and working-class minority neighborhoods in 30 cities.
The lawsuit asserts that Deutsche Bank’s neglect of these real-estate owned (REO) properties — including many in New Orleans – has led to blight, dangerous conditions and a decrease in property values in African-American and Latino communities.
The legal action also names as defendants Deutsche Bank National Trust, Deutsche Bank Trust Company Americas, Ocwen Financial Corp. and Altisource Portfolio Solutions. Ocwen and Altisource are the servicer and property management company charged with maintaining and marketing foreclosed numerous properties owned by Deutsche Bank.
GNOFHAC Director of Policy and Communications Maxwell Ciardullo said last week that the activist groups launched an extensive, nationwide investigation into the defendants’ handling of REO properties after receiving several complaints and reports that Deutsche Bank and its co-defendants treated such properties differently in majority-white neighborhoods than in Black and Latino communities.
“Unfortunately,” Ciardullo said, “we found that was true.”
Ciardullo added that such neglect leads to blight that threatens the welfare of a neighborhood’s other residents.
“They create harmful and dangerous environments for the people who live there, and they drive down property values in the area,” he said. “It doesn’t seem like [the defendants] made any effort” at proper upkeep.
Ciardullo said the GNOFHAC and its co-plaintiffs confronted Deutsche Bank officials with evidence of discriminatory neglect – including a substantial amount of data corroborated by significant photographic evidence – but were largely rebuffed, at which point the lawsuit was filed.
The GNOFHAC and NFHA assert they discovered and documented numerous cases of wild and overgrown grass, unlocked doors and windows, animal corpses, broken doors and windows, and garbage and debris scattered across lawns. The evidence was compiled during a multi-year investigation by the non-profit groups beginning in 2010.
Deutsche Bank spokesman Lawton King said the bank has no comment at this point.
Ocwen spokesman John Lovallo issued a statement denying the charges in the lawsuit and defended the company’s commitment to fairness in its work.
“We strongly deny the National Fair Housing Alliance’s allegations, and believe they lack credible evidence and have no merit,” King said. “The company will vigorously defend itself against these allegations. Ocwen cares about communities, and is committed to equal maintenance and marketing of bank-owned homes no matter where they are located in the U.S. We believe we have in place the necessary quality control standards designed to ensure that all properties are handled consistently regardless of their location. NFHA has previously made these same allegations against numerous other institutions in other complaints.”
Lisen C. Syp, Altisource spokesperson, said the NFHA has issued similar complaints against other firms in the past that have lacked credibility.
“The assertions made by the National Fair Housing Alliance have no merit,” Syp said. “The NFHA research, relied on as the basis of its claims, was previously discredited in 2016 by the U.S. Department of Housing and Urban Development in connection with another claim against a large U.S. bank. Altisource is a property preservation vendor operating on behalf of institutions that service mortgages and foreclosed homes. The NFHA assertions misrepresent both Altisource’s conduct and our role as a property preservation vendor.
“Altisource is committed to the principles of fair housing and neighborhood stabilization. We provide services according to client-approved policies and processes, applied without regard to the racial composition of a neighborhood and supported by industry best practices of quality assurance. We believe NFHA is acting irresponsibly and using misleading and inaccurate information.”
However, Ciardullo noted that the NFHA and its partners have successfully sued such large financial institutions and received significant settlements that the alliance has placed back into neighborhood improvement and upkeep. Other corporations targeted include Fannie Mae, Wells Fargo and even Bank of America.
In December 2016, the NFHA and 20 other non-profit entities, including the GNOFHAC, sued Fannie Mae in federal court in San Francisco, alleging that the federally-backed mortgage company performed significantly less maintenance in minority neighborhoods than in largely white ones. Baton Rouge and New Orleans were two of the dozens of cities examined by the plaintiffs and targeted for action.
In June 2013, Wells Fargo agreed to award the cities of New Orleans and Baton Rouge $1.4 million as part of a larger, $27 million settlement to a lawsuit filed in April 2012 by the NFHA and the association’s partner organizations, including the GNOFHAC.
Ciardullo said such instances reveal a troubling, industry-wide pattern of negligence when it comes to maintaining African-American and Latino communities, much to the detriment of those neighborhoods.
“It does seem pretty prevalent,” Ciardullo said of such neglect. “In each of these cases, we’ve presented each company with evidence and asked if they would work with us [on rectifying the situation], and with every example, [the company] denied culpability, so we decided to move forward with legal action.”
He added that by committing such neglect, the companies “continue to perpetuate discrimination and segregation” in communities.
The NFHA issued a similar lawsuit against Deutsche Bank in February 2014 involving alleged REO neglect in cities like Memphis, Chicago and Washington, D.C. In response to that legal action, the financial giant tacitly shifted blame for the REO blight off itself and onto the firms with which it contracts to conduct the day-to-day upkeep and marketing of properties.
“Deutsche Bank as trustee does not engage in any of the activities alleged in the complaint,” a statement by the bank said at the time. “Loan servicing companies, and not Deutsche Bank as trustee, are solely responsible for the maintenance, marketing and resale of foreclosed properties. Deutsche Bank as trustee does not select, hire or compensate the loan servicers, nor does it have any role in, or oversight over, the actions the servicers take in connection with foreclosed properties.”
Since 2011, the NFHA and its partners have issued three different reports in which they collected large amounts of data and evidence of REO neglect in minority neighborhoods, resulting in the various legal actions. Observers of the industry say the issue of neglected REOs can be a thorny one, largely thanks to the often lengthy foreclosure process.
“Industry attorneys say the problem is due to vacant properties that are left in limbo and can’t be sold because the foreclosure process takes so long,” stated Mortgage Servicing News in April 2014. “States where the foreclosure process takes the most time have the biggest issues, particularly in urban areas where the impact on communities can be very negative.”
This article originally published in the February 19, 2018 print edition of The Louisiana Weekly newspaper.
